No doubt, in the upcoming 2016 election, the Affordable Care Act (ACA) will be one of the main issues. Due to some recent cases, most notably King v. Burwell, parts of the ACA may be struck down. This will result in huge implications to the public as well as parties vying for the presidential seat next fall.

King v. Burwell – Background and Implications

King v. Burwell is a challenge to a key component of the ACA regarding tax credits for individuals. The IRS issued a regulation that federal tax credit is available to all financially eligible Americans, regardless of whether they purchase insurance on a state-run or federally facilitated Exchange.

The plaintiffs in King filed a lawsuit in the United States District Court for the Eastern District of Virginia, challenging the IRS rule on the ground that the ACA authorizes tax credits only for individuals who purchase insurance on state-established Exchanges. Plaintiffs in King v. Burwell argue that the text of the ACA only allows for subsidies on state-run exchanges, and that the regulation as implemented by the IRS providing for subsidies on state-run exchanges as well as federal exchanges exceeded the authority Congress granted to it. The Fourth District and D.C. Circuit ruled in two different ways, and thus the plaintiffs in King filed a cert. petition, which the Supreme Court agreed to hear.

So far, only 14 states have set up their own exchanges. Thus, if the Supreme Court rules in favor of plaintiffs in King v. Burwell, mandates and subsidies will be struck down in 36 other states, since they do not have their own independent exchanges set up. According to the Urban Institute, a decision in favor of King will results in 8.2 million more uninsured people in 34 states. Hence, Congress has been working to come up with an alternative plan.

Paul Ryan, Fred Upton, and John Kline Plan Ahead

Paul Ryan, Fred Upton, and John Kline proposed what they called an off ramp from the ACA that would allow states to opt out of the law’s central requirements. This proposal lets states opt out of the health law’s individual and employer coverage mandates, and insurance policies would no longer have to meet the minimum coverage standards set by law. It will maintain generous tax credits for the purchase of private insurance policies, including refundable tax credits for those who ear too little to owe income taxes.

Tax Credits and Liberalization of Insurance Markets

The new plan would supposedly keep the same core features, but replace the original with a means-tested tax credit that individuals could use to buy a far broader range of insurance products, or deposit the funds in a health savings account. Ryan further reassured the public by stating that the plan would prohibit insurers from imposing lifetime limits on benefits and protect people with existing conditions.

So far, the plan is silent on the question of whether or not the tax credits would be means-tested or uniform. If the plan were to be uniform, then the Center for Health and Economy estimate that it would cover 6 million fewer people than the ACA. If the plan were as Upton revised, it would be more uniform than the ACA, but not completely. That would cover 3 million fewer people.

Side Stepping Issues in King v. Burwell – State Flexibility

There is quite a bit of overlap with the ACA and the new proposals, but one of the differences is that the new proposed act allows more state flexibility. It will give states the ability to pursue their own vision of coverage and avoiding federal mandates as they do so. While committee members have been trying to make this sound like a radical change, in reality, Section 1332 of the ACA already provides many waivers to states to pursue the goals of the ACA without the legislation’s individual and employer mandates or the need to set up exchanges.

Arguments Against the “New Plan”

According to Senator Ron Wyden, there are many people who are opposed to the new plans. He claims that it’s just a lethargic rehash of previous unworkable ideas. It raises taxes on the middle class, removes protections for consumers and chips away at key coverage benefits that Americans relies on.

Depending on how the Supreme Court rules shortly, part of the ACA may be struck down, and the current committee’s suggestions may be put permanently in place and to the test. Legal practitioners should acquaint themselves with some features of the newly proposed plan and prepare for the Supreme Court’s decision.

Biologics are a type of therapeutics derived from, or made by, the biological processes of a living organism, such as human cells, animals, microorganisms, or yeast.1 Examples of biologics include some vaccines, blood or blood components, hormones, and antibodies. Unlike standard chemical drugs, which are relatively small molecules, biologics are often large and complex molecules that are not easily produced through synthetic manufacturing pathways. Due to their production mechanism, it is difficult to create biological products that are exactly identical to the the biologic therapeutic molecule that has already received FDA approval, known as the reference molecule or reference product.

The Biologics Price Competition and Innovation Act (BPCIA), or Bio-similars Act, was enacted on March 23, 2010, as a component of the Patient Protection and Affordable Care Act. The Bio-similars Act was designed to create an abbreviated approval pathway for producers of biological products that are known to be sufficiently bio-similar,or interchangeable,with a therapeutic biological product that has already been approved by the FDA.2These products need to be highly similarto an already approved biological product; however, they do not need to be identical.3 Minor differences in clinically inactive components are allowable in bio-similar products.4 By contrast, the Hatch Waxman Act, which provides an abbreviated approval pathway for generic drugs, applies only to chemical drugs, which must be both functionally and molecularly identical to the original drug.5 The purpose of the Bio-similars Act is to reduce the price of biologics, encouraging the development of competitive bio-similars. As the act allows producers to rely on the studies, clinical trials, and data completed by the reference product producer, bio-similars are expected to retail at approximately 20-30% less than their reference molecule counterparts, helping the U.S. save an estimated $250 billion per year on healthcare costs.6

The European Union developed a framework for bio-similar approval by 2006, and the European Medicines Agency has since approved 21 bio-similar drugs.7

The bio-similar approval process has been slower in the United States – the first bio-similar drug was approved on March 6, 2015, for Zarxio, produced by Sandoz.8 Zarxio is bio-similar to Neupogen, produced by Amgen.9 Neupogen stimulates proliferation and differentiation of white blood cells, and was originally approved in 1991.10 However, the approval of Zarxio has been subject to immediate litigation. As biologics are expensive to research and produce, producers of reference therapeutics have strong interests in protecting their exclusive rights to market their therapy for as long as possible. These initial decisions will shape the bio-similar market in the US, and as such, will likely be heavily contested.

The Amgen-Sandoz Fight

The BPCIA, along with the abbreviated approval process, introduced a scheme for resolving patent disputes for bio-similar products. Commonly referred to as the “patent dance”, 42 U.S.C. §262(l) creates a schedule whereby the bio-similar applicant and the reference product sponsor exchange information regarding the application for the bio-similar; in particular, the parties exchange information regarding patents that may be the subject of litigation regarding the proposed bio-similar product.11 This information exchange may then culminate in two rounds of litigation: an “immediate patent infringement action”on agreed-upon patents, followed by a second round when the bio-similar applicant gives notice to the reference product producer “not later than 180 days before the date of the first commercial marketing”of its proposed bio-similar.(42 U.S.C. §262(l)).12Once the reference product sponsor receives notice of commercial marketing, it may seek a preliminary injunction on any patents that it identified during its information exchanges with the applicant.12

The FDA accepted Sandoz’s application in July 2014. At that time, Sandoz wrote to Amgen that it would not participate in the “patent dance”, and, importantly, claimed that this letter served as notice of commercially marketing the product, therefore (according to Sandoz) starting the 180 day clock for commercial marketing of the bio-similar.13

Amgen immediately filed a motion in the District Court for the Northern District of California for a preliminary injunction to stop Sandoz from commercially launching Zarxio (licensed by the FDA on March 6, 2015), arguing that Sandoz failed to comply with the requirements of the BPCIA, and should therefore be enjoined from entering the market with its bio-similar version of Neupogen.14 Amgen additionally sought an order to compel Sandoz to comply with the “patent dance”provisions, and a declaratory judgment that Sandoz could not provide notice of commercial marketing until the FDA approved the product.

Is the “patent dance”mandatory?

Amgen argued that the patent dance provisions are mandatory, citing to language like “shall”and “required”in each of the steps the parties would take under §262(l). However, Judge Seeborg found that the BPCIA is an optional safe harbor for applicants, and “contain[s] no stick to force compliance”, should that bio-similar applicant choose the potential of immediate litigation. 15

Of particular importance, Judge Seeborg found that the 180-day notice provision is not dependent on approval of the bio-similar by the FDA, stating that “had Congress intended to make the exclusivity period [180 days longer], it could not have chosen a more convoluted method of doing so.”16

Given that this statutory interpretation is an issue of first impression before the court, and the extraordinary importance of the notice provisions under the BPCIA in determining the length of a reference product holder’s monopoly, an appeal will likely follow.

Scridb filter]]>http://stlr.org/2015/03/31/interpreting-the-bpcia-is-the-patent-dance-mandatory/feed/0Social Media and the Discovery Processhttp://stlr.org/2015/03/24/social-media-and-the-discovery-process/
http://stlr.org/2015/03/24/social-media-and-the-discovery-process/#commentsTue, 24 Mar 2015 19:03:09 +0000http://blogs2.law.columbia.edu/stlr/?p=3644Continue Reading →]]>We are using an increasing number of mediums to communicate today, and with this advent in technology, lawyers must likewise learn the new rules associated with discovery and social media – or adapt and stretch the old rules. Facebook, Twitter, Instagram, Tumblr, and others are all new platforms for sharing and obtaining information, some of which may be used in litigation. Given the relative novelty of these channels, the discovery process for them is still murky and developing. Nonetheless, certain rules have emerged.

Courts have established that during the discovery process, social media is not afforded special treatment, and must be included during relevant production. See, e.g., Crispin v. Christian Audigier, Inc. 2010 U.S. Dist. Lexis 52832 (C.D. Cal. May 26, 2010). Furthermore, Romano v. Steelcase Inc. found that for social networking sites such as Facebook and Myspace, a party has no legitimate reasonable expectation of privacy, since these sites do not guarantees complete privacy, and the nature of public posts is to make them available to anyone with a computer. __ Misc. 2d. __, 2010 NY Slip Op. 20388 (Sup. Ct., Suffolk County 2010).

Romano went further, however, and held that even private posts (that is, posts that a user only shares with herself or friends) may be used in litigation under the “material and necessary” standard. This standard is applied on a case by case basis, and weighs the defendant’s need for material and necessary information against the plaintiff’s right to privacy. In the instance of Romano, the plaintiff claimed damages for being confined to her bed, yet littered her Facebook and Myspace pages with pictures of herself out and about. Because the plaintiff was asserting damages from decreased enjoyment of life, evidence of herself active and outside was deemed by the court to be essential for the defendant’s case. Therefore, applying the material and necessary standard, the court ruled that the private portions of the plaintiff’s site had to be made available to the defendant. Apparently, very little is considered sacred when it comes to social media.

It might be tempting instead to simply delete any information that would disadvantage your case, but lawyers and clients must likewise proceed with caution in this arena. Lester v. Allied Concrete Co. shows the terrible consequences that befall careless counsel. Nos. CL08-150, CL09-223 (Va. Cir. Ct. Oct. 21, 2011); http://abovethelaw.com/2011/11/facebook-spoliation-costs-widower-and-his-attorney-700k-in-sanctions/. After discovery requests had been served, the plaintiff became aware of Facebook photos that would cast him in a negative light, to which the plaintiff’s attorney gave the following fatal advice: he should “clean up” his Facebook posts, because they would not want the evidence brought up at trial. Following his lawyer’s suggestion, the plaintiff promptly deleted sixteen mildly incriminating pictures. The court’s response was severe, finding spoliation and giving adverse inference to the plaintiff. In addition, the court held both the plaintiff and his lawyer accountable; the court referred the lawyer to the bar, referred the plaintiff to the attorney general for perjury, and reduced the damages awarded by the jury from $6 million to $2 million.

It is clear that evidence rules, such as spoliation, apply to social media, and that courts will not excuse the poor representation of lawyers who are unfamiliar with their application. The onus is on lawyers to advise clients properly; Lester stated outright that attorneys have an ethical obligation to educate unsophisticated litigants about discovery of social media in particular. The NYCLA Ethics Opinion 745 states that attorneys may specifically advise clients as to (1) what they should/should not post on social media, (2) what existing postings they may or may not remove, and (3) the particular implications of social media posts. If this discussion takes place early enough, before there is a duty to preserve, there is no ethical bar to “taking down” such material from social media publications. But, given that the duty to preserve often arises when an individual reasonably anticipates litigation, the fact that they are talking to lawyer makes it unlikely that there is no duty to preserve. On the flipside, lawyers may advise clients to affirmatively publish information on a social media site, as long as that information is truthful and not misleading.

Scridb filter]]>http://stlr.org/2015/03/24/social-media-and-the-discovery-process/feed/0Claim Construction Under Teva: How Much Deference?http://stlr.org/2015/03/24/claim-construction-under-teva-how-much-deference/
http://stlr.org/2015/03/24/claim-construction-under-teva-how-much-deference/#commentsTue, 24 Mar 2015 19:02:40 +0000http://blogs2.law.columbia.edu/stlr/?p=3653Continue Reading →]]>The claims of a patent define the scope of the exclusive right granted to the patentee. Claims should be written such that a person of ordinary skill in the art can understand the boundaries of the invention. The language, which can sometimes be ambiguous, typically consists of a mix of ordinary languages as well as technical and legal jargon. Thus, an important step for courts, in resolving patent infringement disputes, is the interpretation of the patent claims in a proceeding called the “Markmanhearing.” The court’s interpretation of the patent claims, called claim construction, can provide more clarity regarding the likely outcome of a patent infringement case and help promote settlements.
As the United States Supreme Court held in Markman, claim construction is “exclusively within the province of the court.” To construe patent claims, judges examine the words of the claim, the patent specification, and the prosecution history. Judges are permitted to consider “extrinsic evidence” such as dictionaries, treatises, or expert testimony. Extrinsic evidence is usually considered less reliable than the “intrinsic” patent specification and prosecution history.

Prior to the recent Tevadecision, the issue of claim construction, including both the intrinsic and extrinsic evidence used, was viewed entirely as a question of law subject to de novo review on appeal. However, in Teva, the United States Supreme Court ruled that the underlying factual findings in claim construction at the district court level are subject to a more deferential clear error standard. Thus, if district court’s claim interpretation relied on intrinsic evidence alone, it is an exclusively legal determination subject to de novo review. However, if the district court relied on extrinsic evidence to help define the claim language, these factual findings are subject to the clear error standard.

Two recent cases at the district court and Federal Circuit level may shed some light on how these courts will approach claim construction and claim construction appeals in light of Teva. In Shire Development, LLC v. Mylan Pharmaceuticals, Inc., the District Court for the Middle District of Florida denied the plaintiff’s request for supplemental briefing on claim construction in light of Teva, citing that the claim construction was based only on intrinsic evidence. This could suggest that district courts will be careful in relying on extrinsic evidence in construing claims despite the increased deference to these factual findings post-Teva.

In the Federal Circuit, Teva‘s impact is also unclear. In the recent case, Enzo Biochem Inc. v. Applera Corp., the panel majority reversed the district court’s claim construction because the expert testimony on which the district court relied did not override the intrinsic evidence on which the majority based its interpretation. In reversing the district court’s claim interpretation, the Federal Circuit shows that the introduction of extrinsic evidence into the record may not do much work in protecting district court judges from reversal. In fact, the Federal Circuit could find that the intrinsic evidence is clear enough by itself to interpret a given claim and that extrinsic evidence is unnecessary. Despite this holding, there may be hope for litigants and district courts seeking to rely more heavily on extrinsic evidence in claim construction. Judge Newman, in her dissent, criticized the majority for failing to show error in the district court’s factual findings.

Although Teva ostensibly raises the deference for factual findings in claim construction, in light of the cases discussed above, the use of factual findings in claim construction still seem limited. However, only time will tell whether or not this is actually the case.

Scridb filter]]>http://stlr.org/2015/03/24/claim-construction-under-teva-how-much-deference/feed/0Cy Pres Remedies in the Internet Privacy Class Action Contexthttp://stlr.org/2014/03/16/cy-pres-remedies-in-the-internet-privacy-class-action-context/
http://stlr.org/2014/03/16/cy-pres-remedies-in-the-internet-privacy-class-action-context/#commentsSun, 16 Mar 2014 14:49:41 +0000http://www.stlr.org/?p=2618Continue Reading →]]>Last November, the Supreme Court denied certiorari in Marek v. Lane, a class action case concerning potential privacy violations arising from Facebook’s short-lived and controversial “Beacon” program, which automatically posted information regarding users’ transactions on third-party websites to the users’ Facebook feeds. The class action ended in a settlement, in which Facebook agreed to pay $9.5 million into a cy pres fund to “establish a charitable foundation” that would “fund organizations dedicated to educating the public about online privacy.” Class counsel would receive 25%, roughly $3 million. The new foundation would include a Facebook representative as one of its three board members. Affected users, the members of the class, would receive no direct compensation. Chief Justice Roberts published a statement expressing concern regarding the settlement, stating that the Court would soon need to address questions of when such cy pres remedies are appropriate and whether such settlements are fair.

This type of charity fund cy pres settlement should sound familiar to all Gmail users who tried out the now-defunct Google Buzz in February 2010. In November of that year, a Northern District of California judge approved a settlement in the Internet privacy class action lawsuit regarding Google Buzz’s automatic sharing of users’ Gmail contact lists. Generally, in class action settlements between major companies and classes comprised of large groups of customers, individual customers receive some kind of direct compensation, even if the amount is negligible or the payment comes in the form of coupons rather than cash. However, instead of compensating affected users directly, Google paid out $8.5 million to an “independent fund,” to “support organizations promoting privacy education and policy on the web.” Plaintiffs’ class counsel requested 25% of the settlement fund, or roughly $2 million, to cover attorneys’ fees and expenses.

Charity fund cy pres settlements such as those in the Facebook and Google Buzz cases described above raise various questions of fairness to class members in addition to implicating common criticisms of the class action device. This type of cy pres settlement is becoming increasingly common in class actions involving Internet privacy violations by companies such as Google, Netflix, and Facebook. The use of cy pres settlements in cases involving Internet privacy issues is thus among the trends that led Chief Justice Roberts to express concern with the cy pres settlement format.

One of the main problems with these cy pres settlements is one of fairness to class members. In general, courts are amenable to cy pres fund settlements in cases where “direct payments to the members of the putative class may be impractical,” perhaps because that class is too numerous. Courts generally agree that the distribution of cy pres awards to related charities (such as those educating users on Internet privacy) provides benefits, albeit indirectly, to the class and permit such awards for that reason. Because Internet privacy class actions involve such a large number of users, distributing part of the award to individual class members could easily be too costly or logistically impractical. Thus, courts have become more willing to approve settlements that give none of the award to class members as compensation. Intuitively, this seems unfair, particularly in the context where the Google Buzz lawsuit was broad under a statute providing for damages of up to $1,000 per violation.

An additional problem is that the method for distributing the awarded cy pres funds appears to allow Facebook and Google to direct funds to groups that they already support. As Consumer Watchdog reported, the Google Buzz settlement funds would likely be considered “tax-deductible donations” from Google to groups such as the MacArthur Foundation and the Stanford Center for Internet and Society, already “favored charities” of Google. Facebook’s settlement, on the other hand, sets up a new privacy foundation that would have a Facebook employee as part of its board. Because the settlement would create a new entity, its ability to benefit class members remains unclear. Both settlements seem to benefit the defendants more than the class members, thus appearing unfair.

Finally, given that class counsel in both the Facebook and Google Buzz cases stood to collect a substantial $2-$3 million from these awards, these cy pres settlements implicate the common criticism that class actions are merely a way for plaintiffs’ attorneys to profit while class members gain very little. This is a valid criticism in the context of the Facebook and Google settlements, when individual plaintiffs received no direct compensation even as plaintiff’s class counsel received substantial attorneys’ fees.

Scridb filter]]>http://stlr.org/2014/03/16/cy-pres-remedies-in-the-internet-privacy-class-action-context/feed/0Freeing the Market in Silicon Valleyhttp://stlr.org/2014/03/06/freeing-the-market-in-silicon-valley/
http://stlr.org/2014/03/06/freeing-the-market-in-silicon-valley/#commentsThu, 06 Mar 2014 13:51:26 +0000http://www.stlr.org/?p=2589Continue Reading →]]>Silicon Valley is known for being home to tech giants such as Apple and Google. These companies, and others like them, set the bar for technological innovations which are generated by and depend upon the hard work of thousands of employees. The Valley is vaunted for its respect for the power of an individual’s idea, and these types of success stories have characterized the area for decades. Why then, in this culture of respect for employees, did more than 60,000 of them seek (and receive) a class certification to sue companies including Apple, Google, Intel, and Adobe for antitrust violations?

The class of employees, which originally sought certification in mid-2011, pursues charges against the aforementioned companies for no-poaching agreements that served to prevent increased employee salaries. The allegations and certification have been largely supported by a number of emails between high-level executives at these companies, especially Apple and Google. These emails indicate that the companies, beginning around 2005, had entered into informal, but strongly enforced, agreements which interfered with fair competition. Recruiters at Google, for example, were apparently given “Do Not Call” lists populated with both current and former employees from Apple. In 2007, Steve Jobs, the late CEO of Apple, emailed Google CEO, Eric Schmidt, indicating that a Google recruiter had violated their agreement; the recruiter was apparently fired within the hour.

The impact of these companies’ actions is not trivial. The alleged agreement places serious limits on the free market as a whole, and more specifically, has a significant impact on Silicon Valley employees. These employees, the people responsible for so much of the region’s technological output, have a severely reduced ability to leverage their ideas and skills for higher pay; this results in a serious disincentive for employees to further technological growth. While it is possible to pursue growth and innovation via the start-up route, this road is a difficult one to travel, and monetary payoff is uncertain. In addition, companies may have feared violating the informal agreement and incurring the wrath of Jobs or other company executives. Because of this, they might have been unwilling to hire an applicant who previously worked at one of the other specified companies, making it harder for employees to switch jobs.

A few of the originally accused companies (Pixar, Lucasfilm, Intuit) reached a settlement after the original suit was filed in 2011. The class was initially denied certification in early 2013, but in October of 2013, U.S. District Court Judge Lucy Koh certified the class. Defendant companies appealed the certification, objecting that the class was too large and varied. Indeed, the class covers employees at seven companies in the Silicon Valley holding thousands of different job titles. Regardless, in January of this year, the U.S. Court of Appeals for the 9th Circuit let Judge Koh’s certification stand. The case is set to be heard on May 27th, but the certification of the class and subsequent denial of defendants’ appeal to decertify may put some settlement pressure on the defendants. The damages in the case could be as significant as $9 billion: tech employees in the Valley are frequently paid in the six figures, and whatever finding of suppression of pay would be multiplied across more than 60,000 employees who are part of the class.

It will be interesting to see what impacts, if any, this case will have on companies such as Apple and Google. On a broader scale, will companies gravitate towards different markets than the Silicon Valley, where this type of collusion may appear to be common practice? Now we must wait to see whether the companies, if they go to trial, will be found guilty of these antitrust violations that directly contradict the core free-market principles that made the Silicon Valley a haven for bright entrepreneurs.

Scridb filter]]>http://stlr.org/2014/03/06/freeing-the-market-in-silicon-valley/feed/0How Should International Purposeful Availment Grow with the Internet?http://stlr.org/2013/11/12/how-should-international-purposeful-availment-grow-with-the-internet/
http://stlr.org/2013/11/12/how-should-international-purposeful-availment-grow-with-the-internet/#commentsWed, 13 Nov 2013 02:50:29 +0000http://www.stlr.org/?p=2452Continue Reading →]]>Courts have used internet activity to find personal jurisdiction in the United States. Many of these cases have relied on either the Zippo test from Zippo Manufacturing Co. v. Zippo Dot Com, Inc or the Calder test from Calder v. Jones. The Zippo test applies a sliding scale where a court looks at the interactivity versus passivity of a website to find purposeful availment and is considered to be the main standard in internet jurisdiction cases. The Calder test has been used to determine if a website is targeting a specific forum state even if the website lacks enough Zippo interactivity. Although the case law of internet purposeful availment between states in America is well developed, the increased global use of the internet has brought about new issues in the law. Will a company with an interactive website in Russia or the United Kingdom be able to be sued in those forums? Recently, Google has refused service in the U.K. for a privacy lawsuit brought by internet users in that country. In this still pending litigation U.K. users want to sue Google for alleged privacy violations when Google is run on Safari web browsers. This is a similar claim to an American class action law suit last August where Google agreed to pay out $22.5 million. This lawsuit highlights the growing relevance of internet based international purposeful availment. I believe that an adoption of the Zippo test will significantly raise liability independent of company size, but an adoption of the Calder test will raise liability proportional to the size of the internet using company.

If the Zippo test is adopted, legal costs for all companies that use an interactive website will rise considerably. Currently many startup companies are trying to innovate America and the world with interactive websites of all kinds. When these sites go on the world wide web they can be easily accessed anywhere. Personal jurisdiction in America was expanded slowly because a foreign party would be an outsider to the court and the foreign party would have to pay more to defend a lawsuit in another state. These concerns grow exponentially when one defends a suit halfway across the world. A large company would likely have foreign connections, the capital to translate documents and would likely not be unknown to foreign citizens, but the unfairness presented to any small or startup company would be astronomical. This could lead to frivolous litigation which would deter startups from creating interactive internet innovation.

On the other hand, an expansion of Calder liability would not be as unfair to defendants. Targeting a particular market suggests that the company has connections and language skills in a particular forum which would make purposeful availment in that forum less burdensome. Additionally, larger companies will likely target more forums so the defendants which are best able to handle complex litigation will likely have the most purposeful availment. These companies will be able to vigorously defend claims against them and thus will disincentivize the creation of frivolous litigation. Cases like Yahoo! v. LICRA have followed this doctrine in the reverse direction granting American jurisdiction to a foreign group.

While it is difficult to speculate on how the international internet purposeful availment doctrine will develop in the future, I would support the expansion of the Calder doctrine above the Zippo doctrine. International litigation can be significantly more expansive, unfair and burdensome to parties so jurisdiction should be granted cautiously. Also, whereas in the past a business would likely have to have physical goods arrive to foreign customers to be subject to personal jurisdiction in that location, today parties easily enter forums since the world wide web layer of the internet is truly global and largely public. The global nature of the internet and great costs associated with international litigation should direct future purposeful availment doctrine.

Scridb filter]]>http://stlr.org/2013/11/12/how-should-international-purposeful-availment-grow-with-the-internet/feed/0Is Netflix’s “Watch Instantly” Streaming Service Statutorily Discriminatory Against the Deaf? The Answer is Yes and No.http://stlr.org/2013/02/14/is-netflixs-watch-instantly-streaming-service-statutorily-discriminatory-against-the-deaf-the-answer-is-yes-and-no/
http://stlr.org/2013/02/14/is-netflixs-watch-instantly-streaming-service-statutorily-discriminatory-against-the-deaf-the-answer-is-yes-and-no/#commentsThu, 14 Feb 2013 15:44:36 +0000http://www.stlr.org/?p=2034Continue Reading →]]>Netflix has established itself as the world’s premier on-demand Internet streaming media service, with thousands of movies and TV episodes available for unlimited and instant download and more than 33 million subscribers around the world. Yet, despite its overall popularity, over the past year Netflix has found itself defending against allegations that its “Watch Instantly” video stream service is statutorily discriminatory against deaf and hearing-impaired subscribers in Nat’l Ass’n of the Deaf v. Netflix, Inc., 869 F. Supp. 2d 196 (D. Mass. 2012) and Cullen v. Netflix, Inc., 880 F. Supp. 2d 1017 (N.D. Cal. 2012).

Background

In both Nat’l Ass’n and Cullen, the district courts analyzed whether Netflix violated the Americans with Disabilities Act (ADA), which requires that “[n]o individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.” 42 U.S.C. § 12182(a). The basis for both lawsuits originated from Netflix.com offering only a limited amount of streaming media content available with closed captioning to assist the deaf and hearing impaired by providing readable text of the audio of movies and TV programs. According to the plaintiffs in both cases, the unavailability of closed captioning for all streaming media content on Netflix.com constituted a failure by the company to provide equal access to deaf and hearing impaired subscribers in violation of the ADA’s prohibition against discrimination on the basis of a disability.

Thus, the central inquiry facing the two district courts in Massachusetts and California was whether an Internet website fell under the umbrella of a “place of public accommodation” pursuant to the ADA.

Netflix’s Streaming Service Discriminatory in Nat’l Ass’n

In Nat’l Ass’n, the plaintiffs National Association of the Deaf, the Western Massachusetts Association of the Deaf and Hearing Impaired and Lee Nettles, a deaf person and a member of both non-profit organizations sought injunctive and declaratory relief requiring Netflix to provide closed captioning for all of its Watch Instantly content on its website. Netflix responded by filing a motion for judgment on the pleadings, arguing that the plaintiffs’ complaint failed to allege sufficient facts to establish a discrimination claim under the ADA.

The court held that Netflix.com was a place of accommodation underneath the ADA and rejected the motion for judgment on the pleadings. In reaching this conclusion, the court relied heavily on Carparts Distrib. Ctr. v. Auto Wholesaler’s Assoc., 37 F.3d 12 (1st Cir. 1994)(holding that places of public accommodation are not limited to actual physical structures), to rebut Netflix’s argument that websites and streaming video services were not intended to be places of public accommodation under the ADA. Citing Carparts, the court noted that “[i]t would be irrational to conclude that persons who enter an office to purchase services are protected by the ADA, but persons who purchase the same services over the telephone or by mail are not. Congress could not have intended such an absurd result.” Nat’l Ass’n, 869 F. Supp. 2d 200.

According to the court, the Carparts reasoning was also applicable to web-based services. Therefore, Netflix’s “Watch Instantly” website could potentially qualify for as many as three of the twelve enumerated ADA categories for “places of public accommodation”: A “service establishment” because subscribers are allowed to access the streaming video service via the internet; a “place of exhibition or entertainment” as Netflix.com offers movies, TV shows, and other media content; and a “rental establishment” in that Netflix engages subscribers to rent movies and TV shows.

The court also found unpersuasive Netflix’s argument that because the Watch Instantly website is accessed only in private residences, it could not be considered a place of public accommodation. As observed by the court, “the ADA covers the services “of” a public accommodation, not services “at” or “in” a public accommodation”. Id. at 201.

Cullen Court Finds Netflix’s Streaming Service Non-Discriminatory

Faced with essentially identical facts and claims asthose presented in Nat’l Ass’n, the court in Cullen arrived at a different conclusion in regards to Netflix’s obligation to provide its subscribers with closed captioning for media content on its Watch Instantly website.

The named plaintiff David Cullen – representing a class of deaf and hearing-impaired Netflix subscribers – brought suit alleging violations of California’s Unruh Civil Rights Act (Unruh) and Disabled Persons Act (DPA), which by their statutory definitions are only violated when the ADA is violated. Netflix responded with a motion to dismiss Cullen’s action.

Despite acknowledging the decision in Nat’l Ass’n, the Cullen court recognized that as a district court, it was bound to adhere to Ninth Circuit precedent in the absence of a Supreme Court ruling on an issue. 880 F. Supp. 2d 1023. Consequently, the court relied heavily on the standard set forth in Weyer v. Twentieth Century Fox Film Corp., 198 F.3d 1104, 1114 (9th Cir. 2000), which held that only actual physical places could be considered places of public accommodation under the ADA.

In consideration that the media content on Netflix’s Watch Instantly website could only be accessed by subscribers via an internet connection, the court found that Netflix.com was not “an actual physical place”. Therefore, under the precedent established by Weyer, the court held that Netflix.com was not a place of public accommodation and granted Netflix’s motion to dismiss.

Future Implications of Both Cases

In an increasingly wireless world where many businesses offer diverse entertainment, services and products for purchase by consumers online, the development of the law on the issue of whether a place of public accommodation must be a physical establishment under the ADA will be a significant one to follow. As demonstrated in Nat’l Ass’n, some courts might consider the modern climate in which business and service transactions occur and apply the ADA to provide meaningful protections to disabled online consumers. Other courts might feel compelled to ignore the growing trend of e-commerce and follow traditional precedents, as was the case in Cullen. Either way, given the uncertainty that exists in regards to how courts will interpret and rule on the place of public accommodation issue, one thing appears clear: web-based businesses should begin to consider how to make their websites and services more accessible to the disabled in order to avoid finding themselves potentially defending against a violation of the ADA.

Scridb filter]]>http://stlr.org/2013/02/14/is-netflixs-watch-instantly-streaming-service-statutorily-discriminatory-against-the-deaf-the-answer-is-yes-and-no/feed/0Smartphone Wars: Part IIhttp://stlr.org/2012/09/28/smartphone-wars-part-ii/
http://stlr.org/2012/09/28/smartphone-wars-part-ii/#commentsFri, 28 Sep 2012 13:25:48 +0000http://www.stlr.org/?p=1927Continue Reading →]]>On August 24th, Apple won decisively in Apple v. Samsung. The jury awarded Apple $1.04 billion for infringing Apple’s intellectual property. This was less than the $2.5 billion that Apple requested, but the jury found that Apple wasn’t infringing any of Samsung’s patents. Of the many patents that were disputed, the judgment turned on three patents and Apple’s trade dress argument. The pertinent features were the following: (i) bounce-back effect; (ii) pinch-to-zoom feature; and (iii) tap-to-zoom feature.

This is not the end of the story, of course. As the case developed in the United States, Apple and Samsung were, and continue to be, in a legal battle all over the world. Seoul Central District Court compromised and ruled that Samsung didn’t copy the look and feel of Apple. It further ruled that Apple had infringed upon some of Samsung’s wireless technology, while Samsung had violated Apple’s bounce-back effect. The result was a light slap on the wrist. Both companies had to pay a minimal amount in damages and had some of their older devices banned. More recently on September 21, 2012, a German court ruled that Samsung’s products didn’t violate Apple’s patents.

The discrepancy between the federal jury decision and those of other international courts brings into question whether juries are equipped to handle these types of technical cases. The jury instruction was reportedly over 100 pages, but the jury was able to deliberate after only 3 days. Of course, patents are not the only technical subject where the jury has a say, and there may have been other factors that led to these differing opinions, such as having a home court advantage.

Regardless, Apple and Samsung plan to continue the case in the US. Apple reportedly has been seeking about $700 million in additional damages and a permanent injunction preventing the sale of several of Samsung’s products, while Samsung plans to appeal the verdict and may include a patent infringement claim for violation of Samsung’s patents in LTE technology. LTE is a technology that provides faster connectivity than the standard 3G technology included in the previous generations of iPhones and is included in the new iPhone 5.

Stakes are very high for both companies as they continue their legal battle. There are many differing arguments as to whether patents on software and the magnitude of Apple’s award really promote innovation and new inventions. However, it is important to note that most of the claims were directed towards Samsung’s implementation of Android and Google has already responded to the lawsuit by making changes like implementing a new way to integrate pinch-to-zoom in its latest software.

Furthermore, it likely gives a window of opportunity for Microsoft and Nokia, which increases consumers’ choices. Nokia has opted to stop the development of its own software and decided to bet its future on Microsoft’s new Windows 8 platform. Microsoft’s operating system features a completely different interface and Nokia’s Lumia phones sport a distinct look. While Microsoft has had trouble gaining traction, this controversy could arguably help Nokia and Microsoft’s push to be more main stream.

The mobile market is one of the fastest growing areas in technology. Despite the fact that software patents are controversial and the boundaries are not fully defined, with more companies trying to tap the growing market, consumers will see a lot of new options in the market.

Scridb filter]]>http://stlr.org/2012/09/28/smartphone-wars-part-ii/feed/0Smartphone Warshttp://stlr.org/2012/04/10/smartphone-wars/
http://stlr.org/2012/04/10/smartphone-wars/#commentsWed, 11 Apr 2012 02:51:08 +0000http://www.stlr.org/?p=1812Continue Reading →]]>Apple sues Samsung for patent infringement. In response, Samsung files international countersuits on patents of its own. Courts around the world grant preliminary injunctions to each company on a number of their claims, while United States and European Union government agencies investigate allegations of antitrust violations. What’s going on here? Let’s start with the shiny new weapon that Apple added to its arsenal in June of last year: a patent on the original iPhone, the paperwork for which had been in the works since December of 2007. That patent claims, among other things, the finger-gesture-based set of input methods that has become integral to the functionality of today’s smartphones. Enter Samsung, now the world’s largest manufacturer of smartphones and owner of numerous patents covering globally standardized technological protocols. Samsung’s use of those input methods, as well as overlaps in product design, in its line of Android-based devices has put it squarely in Apple’s crosshairs.

Flicking your index finger up to scroll through an address book? Pinching a map or image to zoom out? Slicing watermelons to bits in Fruit Ninja? They’re all (arguably) covered by United States patent number 7966578 (“the ‘578 patent”). Though the capacitive touchscreen technology incorporated in the iPhone and most every modern smartphone is not itself claimed in Apple’s patent, the very means by which mobile phone users interact with that piece of hardware apparently is. The strength of the ‘578 patent has more recently been called into question by Judge Lucy Koh of the Northern District Court of California, who in October of 2011 ruled that although Samsung’s devices indeed infringe Apple’s patent, Apple still bears the burden of demonstrating the patent’s validity before relief may be granted. Judge Koh more recently denied Apple’s zealous bid to enjoin sales of Samsung smartphones and tablets in the United States.[i]

Apple has additionally based a significant portion of its legal battle against Samsung on similarities in design between the companies’ respective device families. In a recent and rather embarrassing courtroom exchange, Samsung’s attorneys themselves were unable to differentiate their new Galaxy 10.1” tablet from Apple’s iPad 2 while the two were held over the presiding judge’s head at a distance of ten feet. Samsung’s lead mobile device designer last week voiced offense at Apple’s allegations concerning such similarities, declaring, “the Galaxy [smartphone] is original from the beginning,” and the child of Samsung’s own independent efforts. Hardware design similarities are further aggravated by software-based visual overlaps, including the incorporation of rounded square icons in the modified Android operating system that ships with so many of Samsung’s new phones.

Adding fuel to the fire, Samsung filed numerous countersuits hinging on its ownership of patents in standardized technologies like 3G and UMTS communications protocols. That move was frowned upon in the European Union, where Samsung is presently being investigated by the European Commission’s Directorate-General for Competition for alleged antitrust violations on that basis. Due to the necessity of wide access to those industry-standard protocols, Samsung is legally required to license the manufacture of devices incorporating those technologies in a fair, reasonable, and non-discriminatory manner. Samsung’s attempts to secure injunctions against Apple in Europe have failed as a result of those protocol patents’ essentiality to cross-compatibility between different manufacturers’ devices and the wireless networks on which they reside.

So what does this all mean for consumers? Germany has granted a preliminary injunction against Apple’s sale of the iPhone, while Australia temporarily banned sales of Samsung’s Galaxy tablet. Apple’s litigation with Motorola over two patents unrelated to the Samsung dispute further prompted a German court to enjoin sales of certain Apple devices within its borders. German smartphone buyers are now faced with a market severely limited by the effects of these interwoven lawsuits. Samsung has further sought to enjoin the sale of Apple products in its home country of Korea, as well as in Italy, Japan, and a handful of other prominent markets. Indeed, the Apple-Samsung dispute now comprises at least 21 separate suits in ten countries. The outcomes of these lawsuits could have dire effects on the availability of the mobile technologies that consumers have already begun to take for granted.

Apple has never been friendly to the idea of licensing its technologies out to competitors, and unlike Samsung, does not hold patents subject to mandatory licensing under European Union law. Experts opined last year that Apple was trying to knock Samsung, HTC, and other prominent competitors as far down as possible in anticipation of the upcoming holiday season, but domestic sales figures have remained strong on all sides. Apple’s March 16 release of the iPad 3 brought with it nearly $1.5 billion in revenue when upwards of three million units were sold over the opening weekend. If not for the fact that Android device sales significantly eclipsed iOS units’ in 2011, Apple would not appear to need any additional assistance in securing mobile device market share.

As much as Apple fanboys (and girls) would love to see the company’s family of i-devices remain at the top of the pack, some argue that litigation wins on these patent and trademark issues could spell disaster for competitive, and therefore innovative, markets. Google’s Android operating system, which relies heavily on the methods of use allegedly covered in Apple’s patents, would likely suffer significant immediate losses, presenting the risk that consumers will be forced into a “very closed world of Apple’s making.”

On the contrary, the mobile device market has developed so rapidly since Apple’s 2007 release of the original iPhone that Apple’s legal victories could work to usher the development of revolutionary new interfaces for the next generation of mobile devices. In developing its Kindle Fire, released in November of last year, Amazon worked hard to dodge intellectual property infringement issues by designing a tablet that is more easily distinguishable from the iPad than the Galaxy has proven in court. The device is notably smaller and incorporates a proprietary set of algorithms governing the use of pinch-zoom functions and the like. Consumers appear to have greeted Amazon’s device warmly as a marriage of low price and respectable functionality, though solid sales figures have been difficult to pin down. Whether it, along with other Android-based devices, will maintain strong market presence over the long term depends largely upon the wider impacts of the Apple-Samsung litigation and concurrent government antitrust investigations.

Additional considerations in the present round of litigation include the fact that Apple is one of Samsung’s biggest parts consumers, regularly buying huge quantities of capacitive touchscreens and semiconductors from the vertically integrated Korean giant. Samsung further owns patents in the iPhone 4S antenna design, but has yet to use this ammunition to its advantage in the present rounds of litigation. How these factors play into the smartphone wars is a dynamic yet to be observed, but here’s hoping that whatever happens means more and cooler options at market in the months to come!

[i]Blog Editor’s Update: The oral argument for the appeal of this case before the Federal Circuit, which took place on 6 April 2012, can be heard here.